UAE offshore company, Cyprus corporate bank. How does EOI work?

[Eastoe]

Here is my situation. I am EU resident. Having used Swiss banks for privacy previously I decided in 2017 with Switzerland commencing disclosing info to set up a new UAE offshore company with a Cyprus corporate bank account. I had to give the Cyprus bank my EU tax details.
So far I did not withdraw any funds from the corporate account, only using for business expenses. I know UAE start disclosure this year. My questions are:
1) As this is a corporate account is the Cyprus bank likely to disclose my details to my EU country of residence or is that not relevant as the company is UAE registered and it is not a personal bank account?
2) will things change from 2018 now that UAE are disclosing? But I don't have a bank account in UAE.
3) Any suggestions/recommendations going forward? My adviser in UAE say I should set up a new free zone UAE company which gives UAE residency visa (my existing offshore company does not provide this). Open new bank accounts in UAE. Use the UAE residency visa when applying for bank accounts therefore only reporting goes back to UAE where there is no tax.
4) Sort of unrelated, but with the Swiss banks does anyone know whether the information they now disclose only covers deposits made in the current year or total balance including deposits made prior to 2017 when Swiss starting reporting?
Thanks in anticipation.

 

[Martin Everson]

Answers

1. Yes they will disclose to local cyprus tax authority who will pass on to your home tax authority.
2. UAE does not matter. AEOI is a bank account reporting issue not company reporting.
3. Move to UAE with residency visa given when you form FTZ company and problems solved.
4. Everything from 2017 onwards is exchanged. 2018 is only date they hand over the information.

Hopefully the below FAQ can answer many of your AEOI questions

https://www.oecd.org/tax/exchange-of-tax-information/CRS-related-FAQs.pdf

 

[Eastoe]

Thanks Martin.
Yes understand your answers to 2,3,and 4, much appreciated.
On 1) I spoke today with Bank of Cyprus. They said as the account is corporate and belongs to a UAE company their only reporting responsibility is to UAE - not to Cyprus and not to my personal EU tax residency jurisdiction.
That would be great if correct, although of course I still need to transfer some funds to a personal account which would then be reportable back to my own tax authority.

 

[Martin Everson]

Thanks Martin.
Yes understand your answers to 2,3,and 4, much appreciated.
On 1) I spoke today with Bank of Cyprus. They said as the account is corporate and belongs to a UAE company their only reporting responsibility is to UAE - not to Cyprus and not to my personal EU tax residency jurisdiction.
That would be great if correct, although of course I still need to transfer some funds to a personal account which would then be reportable back to my own tax authority.

lol..they are wrong.

Did they really say that? So what they are saying is that anyone with an offshore company will not have the account reported? Does that even sound remotely plausible? What would be the point of AEOI if it was that simple to defeat?

The report is created for all persons involved in the company. So every signatory and beneficiary of that corporate bank account in Cyprus for your UAE company gets details of that account reported to their home country. Nothing you can do about that now its a done deal. Everyone that wanted to avoid AEOI has taken action before end of 2015 by either moving country, using a non-AEOI country or closing offshore structures.

 

[The24]

Thanks Martin.
Yes understand your answers to 2,3,and 4, much appreciated.
On 1) I spoke today with Bank of Cyprus. They said as the account is corporate and belongs to a UAE company their only reporting responsibility is to UAE - not to Cyprus and not to my personal EU tax residency jurisdiction.
That would be great if correct, although of course I still need to transfer some funds to a personal account which would then be reportable back to my own tax authority.

Do you have an email where they wrote this?

 

[fshore]

If the company income is defined as active and not passive, then they will not report the beneficial owner.

 

[The24]

If the company income is defined as active and not passive, then they will not report the beneficial owner.

Are you sure ?

 

[Martin Everson]

If the company income is defined as active and not passive, then they will not report the beneficial owner.

Errr....No.

Banks are ripping out from their systems all details of non-residents and even using indica (foreign mailing addresses, phone numbers etc) and shoving it to their local tax authorities. They are not looking at anything else. For a bank it is better to have false positive than to under report.

 

[fshore]

Errr....No.

Banks are ripping out from their systems all details of non-residents and even using indica (foreign mailing addresses, phone numbers etc) and shoving it to their local tax authorities. They are not looking at anything else. For a bank it is better to have false positive than to under report.

Yes the banks needs to know who is UBO, however this is not part of CRS, for active companies.
If you've done the self-certification forms for banks for CRS then you'll see that if you identify the company as an active NFE, then you don't have to fill in the forms to identify the controlling persons . The bank will report the company as the account holder.

 

[Eastoe]

Do you have an email where they wrote this?

'The accounts belong to xxxxx Limited, so the tax authority that can receive financial information is the UAE tax authority'. Email from the bank.
This is active income, but I don't know whether this makes any difference. When I opened the account they never even asked me for my personal tax authority or tax reference number.
Martin, I would be inclined to think you are right, but when the banks says different it doesn't help. I asked a former accountant of mine and he said that even if I am UBO, this cannot be deemed income for myself until I transfer or withdraw the funds from the business to my personal account. Until such time the income belongs to the company as is taxed accordingly in UAE (so no corporation tax).

 

[Martin Everson]

' I asked a former accountant of mine and he said that even if I am UBO, this cannot be deemed income for myself until I transfer or withdraw the funds from the business to my personal account. Until such time the income belongs to the company as is taxed accordingly in UAE (so no corporation tax).

They never asked for personal tax reference cause UAE is a tax free country. They don't know or even care about tax issues. Today they should ask as part of CRS as they are a signatory member to me. What your account says is correct. However is this correct in your case?

Does your local EU tax authority insist you declare all accounts or companies you control? They do this as they want to know if you derive or could derive a benefit from those assets. Depending on your country, having assets in a offshore company does not shelter your tax liability to tax liability in the EU country today. The tax authority in your EU home country will want to know things like where is the effective place of management and control of the company? This is usually determined by where the majority of directors are living, where you have a substantial presence and where day to day management takes place of the company. So if the majority of directors are living in a EU country then that UAE company will be taxed in that EU country....its that simple. The tax man can simply screw you over. They can ask where board meetings took place etc and prove the UAE is shame entity used to avoid taxes. They will even check flight records and see you never even traveled to UAE for example. None of the methods they use to prove their case they will reveal until you in court perhaps lying through your teeth with fake minutes of meetings in UAE. Then they will present their evidence and you will be forced to plead no contest ;-) I have sat in on a few court sessions of this type in my time.

 

[Martin Everson]

Yes the banks needs to know who is UBO, however this is not part of CRS, for active companies.
If you've done the self-certification forms for banks for CRS then you'll see that if you identify the company as an active NFE, then you don't have to fill in the forms to identify the controlling persons . The bank will report the company as the account holder.

All CRS self certificate forms should follow the standard OECD template provided below...most are in fact a cut and paste job of the below (i.e HSBC):

https://www.oecd.org/tax/automatic-...nd-assistance/CRS_ENTITIES_Self-Cert_Form.pdf

Please can you post a link to the form you are using or point out on the form above what you are saying to back your claim? I think you have made a VERY bad mistake in completing the form. I am sure I know what error you made also...lol ;-)

Btw the CRS has a broad interpretation of what they consider an account holder see below.

Definition of “Account Holder”

The “Account Holder” is the person listed or identified as the holder of a Financial Account by the Financial Institution that maintains the account. This is regardless of whether such person is a flow-through Entity. Thus, for example, if a trust or an estate is listed as the holder or owner of a Financial Account, the trust or estate is the Account Holder, rather than the trustee or the trust’s owners or beneficiaries. Similarly, if a partnership is listed as the holder or owner of a Financial Account, the partnership is the Account Holder, rather than the partners in the partnership. A person, other than a Financial Institution, holding a Financial Account for the benefit or account of another person as agent, custodian, nominee, signatory, investment advisor, or intermediary, is not treated as holding the account, and such other person is treated as holding the account.

 

[Eastoe]

All CRS self certificate forms should follow the standard OECD template provided below...most are in fact a cut and paste job of the below (i.e HSBC):

https://www.oecd.org/tax/automatic-...nd-assistance/CRS_ENTITIES_Self-Cert_Form.pdf

Please can you post a link to the form you are using or point out on the form above what you are saying to back your claim? I think you have made a VERY bad mistake in completing the form. I am sure I know what error you made also...lol ;-)

Hi Martin
Let me get back to you with the self cert form. The bank account was opened by a 3rd party so I need to check exactly what was submitted.

I am not a member of the mentor group as you can see. I only came here a few weeks ago to ask some questions! Are you offering some additional advice/service in the mentor group that might be beneficial?
Thanks

 

[fshore]

OECD form: Fill out 1F, then you don't have to fill out 2. For 3. you fill out the info for the account holder (which is the company).
In OP's case the company's tax residence might also include his home country, and then the company name and details will be shared with his tax home country's tax office, which might lead to that they will ask Cyprus for more information (beneficial owner/controlling person) on the account.

 

[Martin Everson]

. I only came here a few weeks ago to ask some questions! Are you offering some additional advice/service in the mentor group that might be beneficial?
Thanks

Yes I can offer more detailed and open advice in the mentors group if you are a member.

 

[Martin Everson]

Ok, so I'm not here to help you guys evade taxes, but just pointing out incorrect information (which there is a lot of on this forum).

The information you gave is incorrect. You stated and I quote "Yes the banks needs to know who is UBO, however this is not part of CRS, for active companies.". This is not true and goes against all common sense. You are saying effectively that for any active offshore company with nominee signatories (directors, shareholders etc etc) the UBO that should be known to the bank, but may not actively running the company is not reported as part of CRS. So in effect no UBO's of active companies are reported you are saying. This is completely incorrect information you have put out. CRS reporting is more than just the self certification form....lol. The form helps banks gather data but it is not the hard rule for reporting.

OECD form: Fill out 1F, then you don't have to fill out 2. For 3. you fill out the info for the account holder (which is the company).
In OP's case the company's tax residence might also include his home country, and then the company name and details will be shared with his tax home country's tax office, which might lead to that they will ask Cyprus for more information (beneficial owner/controlling person) on the account.

Part 3 should include his home country as that is the place of effective management (where he lives). Cyprus will then send info to his home country. You also run the risk of CRS indicia taking place even without this information being provided on the form. This depends on what CRS software the bank is using.

 

[danzka]

If in doubt why not set up a Wyoming or Delaware llc with US bank account or bank account anywhere you like, I dont think any bank will give details to anyone except the US cmiiw

 

[JohnLocke]

Seems you are right about it with US banks.

 

[Gosha]

Here is my situation. I am EU resident. I set up a new UAE offshore company with a Cyprus corporate bank account.

Hello, which method did you use to create your UAE company? Have you succeeded to get funds out?